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Merlo
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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What is the IRS criteria for a boat loan interest to be deductible

Resolved Question:

What is the IRS criteria for a boat loan interest to be deductible on federal tax returns?
Submitted: 4 years ago.
Category: Tax
Expert:  JKCPA replied 4 years ago.
Hello.

Thanks for your question. Boat loan interest is considered personal interest the same as a car loan. Therefore, it is not deductible unless you use the boat for business.

If you use the boat for business, you would have to figure its business vs. personal use percentage. You would take this percentage and multiply it by the interest expense and deduct that amount.

Hope this helps,
Sincerely,
Expert:  Merlo replied 4 years ago.

Hello neil,

I must add some input to JK's answer which I do not believe to be entirely correct.

While it is true that the interest you pay on a boat loan may not be deductible in all cases, it really depends on the type of boat that you have. A ski boat or smaller boat would not qualify. However, if you have a larger boat which has sleeping quarters, cooking facilities and a toilet, then this would qualify as a second home and the interest on your loan is deductible.

Any type of boat or motorhome or RV which has sleeping quarters, cooking facilities and a toilet qualifies under the definition of qualified home. And you may deduct your interest on your main home plus one other second home, as long as the total loans between the two residences do not exceed $1 million in principal.

So if you have a smaller ski boat or fishing boat without these facilities, then your interest is not deductible But if you have a larger boat that does provide these facilities, then you could deduct the interest as a qualified second residence.

If this was helpful please press the Accept button.

Thank you neil

Customer: replied 4 years ago.
Can you send me the specific IRS code please? I would like to know if there is a more specific definition of sleeping quarters.
Expert:  Merlo replied 4 years ago.
Hello again neil,

There is no expansion on the definition of sleeping quarters. What the regulations state is this:

For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. This means your main home or your second home. A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities.


Refer to page 2 of the following IRS publication under Qualified Home

http://www.irs.gov/publications/p936/ar02.html#en_US_publink100037076

If this was helpful please press the Accept button.

Thank you neil


Edited by Merlo on 11/1/2009 at 7:02 PM EST
Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
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